Dark clouds gather over crucial South African industry

South Africa’s automotive sector, which employs over 100,000 people, is under siege, with demands for 10% wage hikes exacerbating a long list of blows to the industry.

Worker unions for the motoring sector started wage negotiations this month, demanding a 10% increase for workers across the board. Negotiations between unions and employers started in April.

On top of the demand for steep wage hikes, workers are also seeking various allowances related to their respective sectors, the narrowing of wage gaps, and full coverage for medical aid or insurance.

The sector covers employees who are working for petrol garages, car dealerships vehicle body builders, tyre shops, after-market sales and parts, and component manufacturing companies.

Unions have rejected an inflation-based increase, calling it unrealistic given the high and rising cost of living in the country.

This includes double-digit increases for electricity from Eskom and food inflation, which has averaged higher than headline inflation over the past few years.

The National Union of Metalworkers (Numsa) said that its demands for a 10% wage increase are reasonable, given the current cost of living.

“Workers have been suffering, and the wages have not improved much over the years. Whilst we accept that CPI is currently at around 3%, an inflation-based increase is unrealistic because our members simply cannot afford to survive on it,” it said.

While negotiations will play out over time, the steep demand from workers and the looming threat of strike action are adding pressure to an industry that has already suffered a flurry of blows. These include:

• US tariffs on vehicle imports of 25%
• US tariffs on all imports of 10%
• Likely outcome that South Africa is booted out of the African Growth and Opportunity Act (AGOA)
• Uncertainty around the AMSA steel business

A potentially much higher-than-inflation wage hike would be added to the list, compounding the sector’s problems.

South African automotive sector under siege

South Africa exported 390,884 vehicles in 2024 and billions of rands’ worth of auto components annually.

The automotive sector started the year with ArcelorMittal South Africa (AMSA) announcing plans to shut down its steel longs business in February.

The business is crucial to manufacturers, particularly the auto sector, and has been struggling amid high energy costs, logistics constraints and an export scrap tax issue.

The government has been working with AMSA to try to save the business and the tens of thousands of jobs that its shutdown could impact.

In April a R1.7 billion facility from the state-owned Industrial Development Corporation (IDC) allowed AMSA to delay the winding down of the business by at least six months up to 31 August 2025.

However, without fundamental changes to the operating environment, including a desperate need for government reforms, the longs business will continue to follow the same path.

This places the automotive sector in a continual position of uncertainty. Making matters worse, South Africa’s auto sector has been hit by the United States’ tariff war.

Since taking office at the end of January, US President Donald Trump has waged an aggressive tariff war with both friends and foe.

This culminated in Trump announcing a 10% tariff on global imports on 2 April 2025, which took effect on 5 April. He also announced a 25% tariff on all vehicle imports, which took effect immediately.

In 2024, South Africa exported approximately 25,553 vehicles to the United States, representing 6.5% of its total vehicle exports, valued at R27 billion.

Unfortunately, the country also relies heavily on the African Growth and Opportunity Act (AGOA) to gain beneficial access to the US marketplace, especially for the automotive sector.

According to data compiled by Aluma Capital, of the estimated R71.5 billion exported to the US through AGOA in 2024, the automotive sector accounted for R33.6 billion, or 47% of the total.

The Department of Trade and Industry has already conceded that the US tariffs are likely to wipe away any benefit from AGOA. The situation stands to get even worse if AGOA is scrapped.

Economists and analysts consider South Africa’s expulsion from AGOA as a foregone conclusion, warning that the impact will be severe for the sectors that benefit the most from it.

The Automotive Business Council, Naamsa, warned that the situation could have serious implications for jobs and investment in South Africa’s automotive sector.

“We would like to urge the South African government to engage the US administration to urgently seek clarity on AGOA’s future and ensure that South Africa’s automotive sector is not unfairly penalised under these new trade measures,” it said.